2024 (8) TMI 124 - HC - Income Tax

Validity of assessment order u/s 144 r.w.s.144B - without issuing show cause notice - HELD THAT - We are of the opinion that the impugned assessment order passed u/s 144 r.w.s. 144B of the Act would not be tenable in absence of the show cause notice to the petitioner. Accordingly the impugned order is hereby quashed and set aside and the matter is remanded back to the respondent AO so as to enable the petitioner to give reply to the show cause notice to be served in accordance with law. Such exercise shall be completed within a period of 12 weeks from the date of receipt of the copy of this order. The petition is accordingly allowed.

Summary

Issues involved:
Violation of Section 144B (1)(ix) of the Income-Tax Act, 1961 in passing assessment order without show cause notice.

Detailed Analysis:

Issue 1: Violation of Section 144B (1)(ix) of the Income-Tax Act

The petitioner, engaged in diamond trading and jewelry manufacturing, filed an income tax return for Assessment Year 2018-19. The case was selected for scrutiny assessment, and notices were sent to the petitioner's email, which the tax consultant could not access. Despite a notice under Section 143(2) of the Act issued on 22.9.2019, the petitioner was unaware of the ongoing assessment proceedings. Due to personal reasons, including the father's illness and the COVID-19 pandemic, the petitioner was under stress and unaware of the assessment proceedings. The impugned assessment order under Section 144 with Section 144B of the Act was passed, resulting in a significant income addition and a demand of Rs. 54,57,781. The petitioner contended that the assessment order violated Section 144B (1)(ix) by not issuing a show cause notice. The respondent did not refute this claim. The court found a clear violation of Section 144B (1)(ix) and cited various legal precedents supporting the petitioner's argument.

The court, considering the facts and legal precedents, held that the impugned assessment order was untenable due to the absence of a show cause notice to the petitioner. Consequently, the order dated 23.4.2021 was quashed and set aside, remanding the matter back to the Assessing Officer for the petitioner to respond to a show cause notice to be served in accordance with the law within 12 weeks from the date of the order. The petition was allowed with no costs, and direct service through email was permitted.

In conclusion, the High Court of Gujarat ruled in favor of the petitioner, highlighting the importance of adhering to procedural requirements, such as issuing show cause notices under Section 144B (1)(ix) of the Income-Tax Act, 1961, before passing assessment orders. The judgment emphasized the need for procedural fairness and compliance with statutory provisions in income tax assessments.